Apple's Overseas Demand in a Word: Exploding

In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue came from outside the United States. Today, more than half of the S&P 500's growth comes from overseas. And that number is growing.

The truth is, investors regularly underestimate how much demand comes from abroad. More importantly, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from foreign markets.

With that in mind, today we're looking at Apple (Nasdaq: AAPL) . We'll examine not only where its sales and earnings come from, but also how its sales abroad have changed over time.

Where Apple's sales are todayToday, Apple collects 44% of its sales from its home United States market.

Source: Capital IQ, a division of Standard & Poor's.

Where Apple's sales were five years agoFive years ago, Apple collected a far larger 59% of sales from the United Sates. As revenues climbed from about $14 billion in fiscal 2005 to $64 billion in the past year, overseas sales led the charge. Despite being known as a company with more U.S.-focused sales than its peers have historically had, international revenue soared 78% in fiscal 2010, versus a relatively "sluggish" 28% sales-growth rate at home. Apple's international sales are simply on fire.

Source: Capital IQ, a division of Standard & Poor's.

But where are the profits coming from?Another measure to look at is where Apple's profits come from. Sometimes companies can push into new geographies to expand their brand but have limited profits in the new location. That can be a sign of either a growth period or tough dynamics in new markets. In Apple's case, here's the breakdown of its 2010 operating profit before tax.

Source: Capital IQ, a division of Standard & Poor's. Retail sales are distributed in proportion to general sales levels. Accounting for regional differences in retail store sales, end sales may differ slightly.

The Americas are still Apple's largest market in terms of profit, though they beat the European market (which, interestingly, also includes the Middle East and Africa) by only a slim amount. Growth rates continue to soar in Apple's Asia-Pacific region, and it's not unimaginable for that area to constitute the company's largest market in the next half-decade -- or sooner.

Market

Sales Growth Between 2005 and 2010

Profit Growth Between 2005 and 2010

Americas

268%

682%

Europe

508%

1,518%

Japan

331%

1,156%

Asia-Pacific

727%

2,991%

Source: Capital IQ, a division of Standard & Poor's. Retail sales are distributed in proportion to general sales level. Accounting for regional differences in retail store sales, end sales may differ slightly.

Along with the rise of wealth in Asian economies, Apple has seen its fortunes soar. Last year, the company tallied up $8.25 billion in sales (not including retail contributions) to its Asia-Pacific region -- an area that includes Australia and all of Asia except for Japan. In the first half of the year, before its historical peak season, Apple is already reporting that it has just under $5 billion in sales to greater China alone. Apple's sales level to China is up four times year over year, and it's not even on China Mobile (NYSE: CHL) , the country's largest carrier, with 600 million subscribers.

Competitor checkupOne last point to check is how Apple's footprint compares with some of its peers across the broader technology industry.

Not surprisingly, Apple isn't as geographically diversified as Nokia, which sells low-cost "feature phones" that are popular across the world. What's truly shocking is that Apple has managed to make such surprising inroads into markets such as China, despite the high non-carrier subsidized cost of the iPhone. That's in large part the result of having consumers perceive high-end smartphones as a luxury item worth spending large amounts of money on.

What might be surprising to Apple investors is that Research In Motion is seeing comparable gains in International sales. While its U.S. sales tumbled 10% last fiscal year despite booming smartphone sales, its combined International sales grew 91% in that same time frame. However, the tide can quickly shift in smartphones, and Research In Motion is predicting a steep sequential sales decline in the coming quarter, so its emerging-market stronghold may be beginning to crumble as well.

Keep searchingIf you're looking to stay updated on Apple or any other companies discussed here, make sure to add them to our free watchlist service, My Watchlist. It's free, and it helps you constantly stay updated on the news and analysis of your favorite companies.

Comments from our Foolish Readers

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These rates of growth should be taken with a grain of salt. They are harder to sustain over long periods as the companies grow larger and the sales mount.

This holds for Apple or any other company for that matter. Can one realistically imagine every man, woman and child on the planet buying an Apple product by 2015? 'Coz this is what it would take to grow by over 100% :-)

@InfoThatDoesn'tHelp

Yeah, right.

Conscious and tech-savvy buyers are _not_ going to spend 3-4 times for Apple hardware than for standard Windows/Linux machines.

As for their mobile products, they are so bandwith hungry that on older networks a bottleneck will very soon be hit, so the operator incentives will still go, at least for a while, towards more efficient phones (feature phones or Blackberries).

Prospective customers in these markets might not put up with call dropping and the crappy peer-to-peer communication of these devices primarily conceived as iTunes + game sellers.

Online entertainment might not be on their priority list, just yet.

So far, so good, Apple had a stroke of genius with the wheel on their iPod and the white rounded-corner cases (which, btw, gave _the_impression_ of simplicity, not actual ease of use to their devices), but it remains to see how long they can ride this wave.

Also, the perception of Apple as "the cool alternative cult" that formed in 2001-2007 is not going to last forever. To say nothing that it was restricted to affluent U.S. and parts of W.Europe

Wow interesting feedback. However, Apple has sustained enormous growth over 10 years including the biggest economic depression in 70 years. There is enormous space to expand, smart phones are only 10% of the world market so if Apple merely keeps its current smart phone share then it can expand sales that by 1000%, iPads [and tablets] remain an entirely new market, but if Netbooks are any indication and low end PCs/Macs market vulnerability then 10,000% world wide is imaginable, and finally Apple has outgrown PC market [numbers, income, and profit] over the last 5 years and has 95% of the market to grow into. So assuming Apple does not do something transformational [not a good bet based on the last 13 years] it has lots of room to sustain spectacular growth. Can it do so, with the competition, good question? Recent history since 1997 would suggest its possible.

Why is it that the haters can never write legibly? Do they realize they hurt their own cause? I mean anyone reading their gibberish is going to be turned off by the immature writing. I probably shouldn't tell them, and just let them continue their immature behavior.

It amazes me that the Motorola troll can post his tripe in so many places for so long. I figured he'd be out of his position by now! Amazing!

Well, Mr. so called ITSpecialist, you are clearly hallucinating. RIM is in severe trouble, as you can read anywhere. Their own co-CEOs are admitting that RIMs numbers are going down. Their sales last quarter went down for the first time ever. Sales growth several quarters before were slowing down, and were below their own estimates.

They just discontinued development of the 10" Playbook. Current Playbook sales have been disappointing, and production for next quarter have been slashed by half.

I am in Asia - Apple is doing everything right here; 5 years ago nobody knew Apple except for graphics designers. In 2011, *everyone* has an iPhone. Apple's rise here is almost all iPod and iPhone halo effect. I now see more iPads and MacBooks in the coffee shops than Windows PCs. This was unimaginable 5 years ago.

Most importantly: Apple prices in SE Asia are on par with US prices.

What I don't understand is Apple's strategy in Europe: They are keeping prices 10 - 20% above US prices, and that's before applying the much higher European VAT. A MacBook Pro ends up $500 more expensive than in the USA! I think Apple is missing out on a ton of sales in Europe because of this - everyone has internet, and everyone knows Apple products in the EU are grossly overpriced. PCs, on the other hand, cost about the same as anywhere else. Apple could do a whole lot better in Europe simply by offering fair prices.

@Infektu: I think the growth rates in Asia can be sustained because the halo effect is only going to grow and in both tablets and phones there's huge growth to he had. The PC market is flat but a lot of it will shift to Mac.

As for the cool / kult factor - it's misunderstanding Apple to think that this drives sales. Apple has always tried to make better products, and always believed that better products will sell more. The cult that formed around the brand was never of any concern or relevance to the company.

Whether or not the next Apple phone is going to be a hit depends almost entirely on the quality of the product and its ability to distinguish itself from the competition. While Android is gaining in terms of usability and features, I think Apple stands a pretty good chance of retaining the "king of smartphones" crown for a good while to come.

>such as China, despite the high non-carrier >subsidized cost of the iPhone. That's in large

>part the result of having consumers perceive

>high-end smartphones as a luxury item worth >spending large amounts of money on.

Reliability and built quality are important in Asia. They are important to a lot of us in other countries as well. The same is true for great software design and execution! Once people learn Apple products, their PC friends and colleagues will start treating them as if they forgot about the PC and have no ability to go back. That's the farthest thing from the truth. We were often experts, remember? We simply do not want Windows any longer.

Mac already took the high end of the PC. IT's gone. iPad has killed the 'netbook'. That was the only thing that propped up PC industry sales in the past few years. Pretty soon MSFT is stuck in the middle, with nowhere to go. All the PC companies and IT guys are really getting concerned.

Oh, and that old saw about how Apple products are overpriced. As if. iPad is the lowest priced and yet best built tablet, with the best support, most apps, best media support, etc… Just the best, no one can deny that with a straight face. It's hilarious the way the PC copy-cats are clinging to FLASH. Wow, talk about desperate. Truth is, Flash is about as necessary as the floppy disc.

Macs cost a bit more than some PCs, but not if you can find a comparable PC. However, in most cases there IS no comparable PC, and that is ASSUMING you don't want the Mac OS--the Mac's biggest advantage! The Mac runs everything. Your PC doesn't. Apple turned the tables on that old issue!

It's dumfounding that anyone would want to miss out on the Mac OS. It's awesome. See what Windows was SUPPOSED to be like. You owe it to yourself, life is short.